Spring is Flood Season and a Reminder to Consider Buying a Flood Insurance Policy

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Mar 20, 2012, 02:54 ET

Dry Winter Weather Has Reduced, But Not Eliminated, the Risk of Flooding

NEW YORK, March 20, 2012 /PRNewswire-USNewswire/ -- Spring officially begins today and, while this winter's mild, dry conditions have reduced the likelihood of severe flooding events caused by melting snow in some parts of the country, it has not eliminated the risk of flooding caused by rain, hurricanes or other disasters, according to the Insurance Information Institute (I.I.I.).

Homeowners, renters, and business owners should consider purchasing a flood insurance policy, or renewing an existing one. Just last August, Hurricane Irene resulted in flood conditions with rivers and streams rising to record levels in 10 states. Floods are one of the most common hazards in the United States. Some develop slowly while others, such as flash floods, can materialize in minutes. Moreover, floods can be both very local, impacting a single neighborhood or community, or very large, affecting multiple states.

Unfortunately, the number of people financially protected by flood insurance is still very low, and getting lower. A 2011 poll by the I.I.I. found that 14 percent of American homeowners had a flood insurance policy, up from 10 percent in 2010 but still below the 17 percent who said they purchased flood insurance in 2008. The percentage of homeowners with flood insurance was highest in the South, at 19 percent, up from 14 percent in 2010 and back to the level of 2009. Thirteen percent of Midwestern homeowners had a flood insurance policy in 2011 along with 12 percent of homeowners in the West and 5 percent in the Northeast.

Flood coverage is excluded under standard residential insurance policies as well as under many commercial property insurance policies. Coverage for flood-caused damage is available from the federal government under FEMA's National Flood Insurance Program (NFIP), and from a few private insurers.

Flood damage to cars is covered under the optional comprehensive portion of a standard auto insurance policy.

The NFIP's flood insurance policies cover direct physical losses caused by flood as well as losses resulting from flood-related erosion caused by heavy or prolonged rain, coastal storm surge, snow melt, blocked storm drainage systems, levee or dam failure, or other similar causes. NFIP policyholders can be covered for up to $250,000 for damages to building property on a replacement cost basis and for a maximum of $100,000 in damages to personal property (contents) on an actual cash value basis. Replacement cost coverage pays to rebuild a structure as it was before the damage. Actual cash value is replacement cost, minus the depreciation in value that occurs over time. The average NFIP flood claim has over the past decade amounted to over $33,000, the NFIP reports.

There is a 30-day waiting period—from date of purchase—before a new NFIP policy goes into effect, so it is important to buy your policy ahead of time.

The NFIP paid out $1.1 billion in flood claims to policyholders who incurred damages after Hurricane Irene slammed the Atlantic seaboard in late August 2011, FEMA data indicates.

Since the NFIP was created by Congress in 1968, 25 to 30 percent of all paid NFIP claims were for damages incurred in communities not officially designated at the time of the flood as a special flood hazard area. NFIP coverage is available outside high-risk zones at a lower premium. Consumers can get more information by visiting the NFIP's FloodSmart website. The site has tools that can tell you approximately what your risk of flooding is, and estimate how much a policy will cost.

Private flood insurance is available for those who need additional insurance protection, known as excess coverage, over and above the basic NFIP policy limits, or for people whose communities do not participate in the program. In addition, some insurers have introduced special policies for high-value properties; these policies may cover homes in non-coastal areas and/or provide enhancements to traditional flood coverage.

"Just because most of the United States had dry and mild winter weather doesn't mean flood risks have altogether disappeared," said Michael Barry, vice president, Media Relations, I.I.I. "Largely due to the limited winter snowfall, for the first time in four years, no area of the country faces in 2012 a high risk of major to record spring flooding, according to the federal government. But some states have still been deemed as being at above-normal risk of flooding."

"The Ohio River basin, including portions of Illinois, Indiana, and Kentucky, along with parts of Louisiana and Mississippi are the only areas [of the U.S.] with an above-normal risk of flooding as soil moisture and river levels are currently above normal. Additionally, odds favor above-average April rainfall for the Ohio River basin," the National Oceanic and Atmospheric Administration (NOAA) stated last week in its 2012 Spring Outlook, an assessment the agency produces annually.

RELATED LINKS
I.I.I. Insurance Industry Blog: Spring Flood Risk Lower, But Not Eliminated
Issues Update: Flood Insurance
Facts and Statistics: Flood Insurance
Video: Water Damage: What Is, and Is Not, Covered

THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.

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SOURCE Insurance Information Institute